Could The Dawson Geophysical Company (NASDAQ:DWSN) Ownership Structure Tell Us Something Useful?

If you want to know who really controls Dawson Geophysical Company (NASDAQ:DWSN), then you’ll have to look at the makeup of its share registry. Large companies usually have institutions as shareholders, and we usually see insiders owning shares in smaller companies. I quite like to see at least a little bit of insider ownership. As Charlie Munger said ‘Show me the incentive and I will show you the outcome.

Dawson Geophysical is a smaller company with a market capitalization of US$57m, so it may still be flying under the radar of many institutional investors. Taking a look at our data on the ownership groups (below), it’s seems that institutional investors have bought into the company. Let’s take a closer look to see what the different types of shareholder can tell us about Dawson Geophysical.

View our latest analysis for Dawson Geophysical

NasdaqGS:DWSN Ownership Summary, January 21st 2020
NasdaqGS:DWSN Ownership Summary, January 21st 2020

What Does The Institutional Ownership Tell Us About Dawson Geophysical?

Many institutions measure their performance against an index that approximates the local market. So they usually pay more attention to companies that are included in major indices.

As you can see, institutional investors own 51% of Dawson Geophysical. This suggests some credibility amongst professional investors. But we can’t rely on that fact alone, since institutions make bad investments sometimes, just like everyone does. It is not uncommon to see a big share price drop if two large institutional investors try to sell out of a stock at the same time. So it is worth checking the past earnings trajectory of Dawson Geophysical, (below). Of course, keep in mind that there are other factors to consider, too.

NasdaqGS:DWSN Income Statement, January 21st 2020
NasdaqGS:DWSN Income Statement, January 21st 2020

Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. It would appear that 7.4% of Dawson Geophysical shares are controlled by hedge funds. That worth noting, since hedge funds are often quite active investors, who may try to influence management. Many want to see value creation (and a higher share price) in the short term or medium term. Our data shows that Dimensional Fund Advisors L.P. is the largest shareholder with 7.9% of shares outstanding. The second largest shareholder with 7.4%, is Renaissance Technologies Corp., followed by Columbia Management Investment Advisers, LLC, with an ownership of 6.8%.

Additionally, we found that the top 11 have the combined ownership of 51% in the company, suggesting that no one share holder has significant control over the company.

While studying institutional ownership for a company can add value to your research, it is also a good practice to research analyst recommendations to get a deeper understand of a stock’s expected performance. As far I can tell there isn’t analyst coverage of the company, so it is probably flying under the radar.

Insider Ownership Of Dawson Geophysical

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

Most consider insider ownership a positive because it can indicate the board is well aligned with other shareholders. However, on some occasions too much power is concentrated within this group.

I can report that insiders do own shares in Dawson Geophysical Company. As individuals, the insiders collectively own US$4.3m worth of the US$57m company. Some would say this shows alignment of interests between shareholders and the board, though I generally prefer to see bigger insider holdings. But it might be worth checking if those insiders have been selling.

General Public Ownership

With a 34% ownership, the general public have some degree of sway over DWSN. While this group can’t necessarily call the shots, it can certainly have a real influence on how the company is run.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Take risks, for example – Dawson Geophysical has 2 warning signs we think you should be aware of.

Of course this may not be the best stock to buy. Therefore, you may wish to see our free collection of interesting prospects boasting favorable financials.

NB: Figures in this article are calculated using data from the last twelve months, which refer to the 12-month period ending on the last date of the month the financial statement is dated. This may not be consistent with full year annual report figures.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

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